5 Biggest Problems of Startup in China

China is a country that presents a lot of opportunities but starting a business requires to face many challenges. To begin with, you can follow Chinaaccerator program. In fact, this is a biannual program runs for three months. If they accept you , you have the possibility to stay there for 6 months and launch as soon as possible a corporate partnership.

VISA your “FIRST HEADACK” in China

For the legal aspect China does not offer “ startup” visa option . Therefore, getting a visa can be a very hard path as a foreigner, without company and without nothing….

THE place to Be

Which City?

Shanghai ?

Shenzhen ?

Beijing?

Where is the Silicon Valley in China… There is no Obvious reply

Office, shared offices or WorkPlace?

For the space in which you will settle the company, you should look at co working space facilities. During these last years they know a true boom so there are plenty of open space in China. There are some famous one like BundSpace ,People Squared and We work. You need to get ready to manage cultural miscommunication, intellectual property rights, the restrictions on inbound investment , the Chinese government transparency, discrimination. Moreover, you should consider the internet connexion which is very slow and highly watched.

In China , relation in other words guanxi is a must have because it will really help you in your business. Guanxi is a kind of score system that influence the notion of hierarchy and saving face. For instance , it is current that a person that has solid relation to lend money in order to make business together and seize opportunities.

Extend your  network (Guanxi is like Water, it is Vital in China)

In the same spirit of having guanxi, you should get to know people and also ask them how they become successful but also how they failed in order to avoid some beginners’ mistakes.You should also travel in China and start serious networking at local trades events since relationship are essential when you do business.

Find funding

If you decide to build a start up, you will need funding. You will have to get closer to investors perhaps institutional ones such as IDG Capital Partners, Matrix Partners China , ZhenFund , Northern Light Venture Capital , Innovation Works. Actually China’s tech huge players invest a lot of money into start up.

For example, Tencent which is the maker of We chat , appears as the second biggest investor in China.  Other titans such as Alibaba have significant capacities to invest.

China is a vast country, so you need to choose a specific location even if you have the full country at your disposal because you cannot expect to be set your business anywhere and to be successful. First of all, you have to get know big cities which are Shanghai, Beijing, Guangzhou. They are the major business, government and industrial centers.

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Solid business plan

Before you get in the government’s record you should make sure about the type of business entity to register. The most common for foreign businesses are joint ventures, representatives offices. You need to have the most detailed business plan as possible because once you are registered you cannot do other activities besides the one written in you contract. If you try to offer some goods and or services not included in your business plan, the government may shut your business down. The same rules work for the location and the way you operate. Make sure that every single detail is included in the contract such as location, projected revenues , product or service description , expected number of employees and budget requirements in the plan.

Hence, you should think about intellectual property violations. They represent a big issue for foreign investors in China. Many Firms believe that because their brand is famous and recognized in their home country and do business as a trademark it will be the same in China. Unfortunately, this is not the case. Indeed, in China, the first person to register a trademark owns the right regardless or not that person is the first person to use the trademark. (see also this article)

Human ressources ; HUGE problem for Startups in China

it is really difficult to hire talent at reasonable Price in China, REALLY REALLY Hard.

You think it is the easy part I am sure… Well you will see.

Concerning the recruitment, hiring in China is a sensitive process especially when you want to hire managers. This is not because a person can speak a good English that he or she has the skills to manage your business. If the person has good business skills then it can be interesting for you that this person can speak good English but since the business is the priority you should look at that first. Indeed, you really need a qualified people when you are a start up to build solid basis. Nonetheless , it seems logical that good talents will cost you a certain amount of money . If you want the best for your business then you should put money in it. You need reliable people. If you can  trust in these people , they will be able to help you to hire the rest of the staff. But be careful , in China contract is very important, you need to have one with all your staff including manual employee. If you don’t do so , you cannont fire them is something go wrong.

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